Crude: Short-term consequences of long-term support

(Based on the July 4, 2014 Oil Investment Update. Article originally published on July 8, 2014, 2:26 PM.)

The end of the first half of the year and the second quarter and June are behind us. Without a doubt, it was a good time for crude oil (NYMEX:CLN14).

Since the beginning of the year, light crude climbed from the Jan. low of $91.24 to a nine-month high of $107.68 in the previous month and erased almost 80% of the Aug.-Jan. decline. But are these numbers as bullish as they look at the first sight? Not really – especially when we compare them with the current situation in the XOI. When we take a closer look at oil stocks, we see that during the last 6 months they not only climbed above the 2013 high, but also erased entire 2008 decline, hitting an all-time high of $1,730.

At the end of June, the XOI declined below the psychological barrier of $1,700 and still remains below it. Does it mean that the recent rally in oil stocks running out of steam? Let’s examine the NYSE Arca Oil Index (XOI) from different time horizons and find out what can we infer from the charts (charts courtesy by


Let’s begin with the long-term chart.


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